Probability of Firm Expropriation Modeling

4 Pages Posted: 3 Aug 2017

Date Written: July 28, 2017

Abstract

This article presents a dynamic equilibrium model of firm valuation under the risk of expropriation. It was determined that equilibrium weighted average value of capital of such firm should be increased by the probability of expropriation. There has proposed a model that determines the probability of firm expropriation under the conditions of indifference between the capture of the company and monthly payments for the "protection service" to a high-ranking racketeer.

Keywords: risk of expropriation, probability of expropriation, firm valuation, racketeering

JEL Classification: D19, D21, D46, D72, G12, G31

Suggested Citation

Akopyan, Artashes, Probability of Firm Expropriation Modeling (July 28, 2017). Available at SSRN: https://ssrn.com/abstract=3011963 or http://dx.doi.org/10.2139/ssrn.3011963

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